Continental Tyre Corporation is capable of producing 30,000 units of tyres per month. Below is information on production costs at the production levels of 10,000 units and 20,000 units. Production level Cost per unit Cost behaviour Cost Element 10,000 units 20,000 units 10,000 units 20,000 units Direct Materials RM 4 RM 4 VARIABLE RM40,000 RM80,000 COST Direct Labor RM 6 RM 6 VARIABLE RM60,000 RM120,000 COST
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
![A. Continental Tyre Corporation is capable of producing 30,000 units of tyres per month.
Below is information on production costs at the production levels of 10,000 units and
20,000 units.
Production level
Cost per unit
Cost
behaviour
10,000
20,000
Cost Element
10,000 units 20,000 units
units
units
Direct Materials
RM 4
RM 4
VARIABLE
RM40,000
RM80,000
COST
Direct Labor
RM 6
RM 6
VARIABLE
RM60,000
RM120,000
COST
Indirect Materials
RM 2
RM 2
VARIABLE
RM20,000
RM40,000
COST
Factory Utilities
RM 1.2 RM 0.9
MIXED
RM12,000
RM18,000
COST
Factory Rental
RM 2
RM 1
FIXED
RM20,000
RM20,000
COST
RM 2.4 RM 1.2
Factory
Equipment
Depreciation
FIXED
COST
RM24,000
RM24,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa899f548-8385-4f99-a284-f2f88a6d9204%2F069c46cd-e5ef-4606-b4df-7673debecc1a%2F8ogsyeq_processed.jpeg&w=3840&q=75)
![ii.
Separate (CLO 3, C4) fixed cost and variable cost for cost elements that have
mixed cost behaviour using the high-low method and state (CLO 3, C2) the
cost function. Estimate (CLO 3, C3) the total cost for this cost element, if the
production level is 25,000 units.
Sketch and label (CLO 3, C2) the graph for each of the following cost items.
i)
ii)
ii)
iv)
Fixed cost per unit
Total fixed cost
Variable cost per unit
Total variable cost
B.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa899f548-8385-4f99-a284-f2f88a6d9204%2F069c46cd-e5ef-4606-b4df-7673debecc1a%2Fpry60r_processed.jpeg&w=3840&q=75)
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